Most of us love money. And when it comes to money most of us are short sighted and forget to think long term. For example, I’m sure you’ve seen the car advertisements where you can drive off with your dream car today for payments of just $183 a month. Of course, in the small print it says you’ll be making these monthly payments until the day you die, so it’s not that great of a deal after all.
Well… the same thing goes for real estate. I live in the Washington, DC area and some of my investing in the Baltimore, MD since it’s close by. Often, I’ll get calls or emails from wholesalers who have “the deal of a lifetime on a $25,000 property with cash flow of $200 a month.” If you’re new to this business that will obviously sound great.
But I know that the $25,000 house will most likely be the only house on the street that’s not boarded up. And that there will be crack dealers on the corner and homeless people sleeping on the sidewalk. (This is all true. Earlier this week I was in Baltimore and I walked right over a homeless guy who decided to take a nap right in the middle of the sidewalk.)
Would you go there at night?
My point is, I think it’s extremely foolish to invest in war zones and have to deal with the “less desirable” tenants that these types of properties tend to attract. Or in even simpler terms, if I were you, I would never buy a house where I didn’t feel safe visiting at night.
Of course, a lot of people disagree with me. But over the years I’ve found those people were the wholesalers trying to make a quick buck off the property. In fact, I’ve had a wholesaler tell me that he would never own a property in the ghetto of Baltimore, but that he’d of course try and make a $5,000 wholesale fee off it.
I don’t blame him for wanting to make money.
But if you’re ever approached by one of these wholesalers I hope you’ll think long term. Think about dealing with the pain in the butt tenants, the drug problems that could occur and having to go to that house personally to deal with tenant problems.
Again, it doesn’t sound too pleasant and my life is worth a lot more than trying to get $200 in cash flow on a property that will probably have more vacancies than one in a desirable area.
I know I’ve beaten this to death, it’s just that I’ve seen new investors get taken advantage of and talked into getting their first deal in a war zone. Just be careful and use common sense when deciding where to own your rentals.
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